Thursday April 15, 2021
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Economists: EU-Mercosur is favorable for growth of both economies

The free trade agreement between the European Union and the four South American Mercosur countries is beneficial for both economies. This is evident from the publication of the long-awaited impact assessment of the Mercosur Treaty.

The Sustainability Impact Assessments (SIA) is an independent report prepared by the London School of Economics on behalf of the European Commission. According to the SIA, the Mercosur agreement will positively impact the economies of both trading blocs. SIA notes that the agricultural sector in the EU will also benefit from the agreement.

According to conservative figures, the gross domestic product (GDP) in the next ten years could grow 0.1% in the EU and 0.3% in Mercosur. A more ambitious scenario predicts double the amount: € 15 billion for the EU countries and € 11.4 billion for the South American countries over the same period.

The agreement will increase total EU exports by about half a percent and imports about one percent. However, Mercosur's beef supply will grow significantly faster, at 30% or even 64%. In the EU countries, meat production will simultaneously shrink by 0.7% to 1.2% respectively.

According to the impact assessment, European dairy exports would benefit significantly from lower import tariffs. The conservative scenario assumes a dairy increase of 91%; in the ambitious scenario this is another 30 percentage points more.

The SIA also examines the impact on the environment, human rights and the South American indigenous population. These issues are very central to the criticism of the EU's approach. According to the economic researchers, the treaty offers sufficient possibilities for improvements.

The European Commission has already made it clear that it needs concessions from the Mercosur countries before the treaty can be presented to the European Parliament for ratification.

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